Donatos Pizza may be 57 years old, but it isn’t showing its age.
“This is one of the most exciting times that I’ve seen here,” said CEO Tom Krouse, a 20-year veteran of the Gahanna-based restaurant chain. “We have some pretty major growth in our sights.”
Key moments in Donatos history include the 1963 founding by Jim Grote, the 1999 sale of the company to McDonald’s Corp. and the 2003 reacquisition by the Grote family. Krouse said 2020 might be another seminal year for the business.
“This has the size of change of something like the McDonald’s sale, but without the loss of control,” he said.
Historically, expansion has been somewhat hamstrung by Donatos’ own standards, keeping its footprint confined to 161 restaurants across 10 states.
“Part of what makes Donatos great is the unique recipe,” Krouse said. “(We have) our own recipe of pepperoni. We make the dough, the sauce. It’s not off-the-shelf type products that a lot of other pizza places use. The downside is it makes it a little harder to grow. You have to be able to ship those ingredients. We have to be true to the brand first.”
But a few key pieces have fallen into place, opening the brand up to significant growth in 2020.
First, it’s going to Florida.
“I think about 40% of the franchise leads that come to us come from Florida,” Krouse said. “Be we couldn’t consider it for a while because we didn’t have business in those markets.”
Rather than rolling out one or two stores in a new market just for the sake of growth, the company built up multiple deals that helped make the distribution expansion feasible. The Jacksonville, Orlando and Sarasota markets all will be getting Donatos pizzerias, as will three other as yet unnamed cities in the state.
The second major growth opportunity stems from Donatos’ new relationship with Denver-based Red Robin. The two brands tested a limited menu of Donatos pizzas inside about 25 Red Robins last year. The early returns were good enough that the pizza menu is expanding to 100 Red Robins this year, roughly 20% of that burger joint’s footprint.
That opens up growth possibilities for Donatos west of the Mississippi River and on the West Coast, territories that until now have been untouched by the Donatos name.
“It’s a double whammy because there are people who are from Ohio or went to Ohio State that know Donatos,” Krouse said. “They’re excited about it when it comes. Then through Red Robin’s support with advertising, more people will know who Donatos is.”
It’s a promising partnership. Red Robin gets a branded menu expansion and potential way to bring in more customers for the cost of adding essentially a mini-Donatos kitchen operation to its existing restaurants. The restaurants use the same equipment as a traditional Donatos and are trained the same as Donatos employees. Donatos gets to add 100 new locations without a big outlay of capital.
“We can expand quickly and resource light,” Krouse said.
The moves effectively open the entire U.S. up to Donatos expansion.
Red Robin isn’t just a marketing and logistical win for Donatos, it’s a design advancement as well. Donatos has 15 non-traditional locations, sites like airports and sports stadiums, but based on what it learns from the Red Robin partnership, it could open more.
The company’s work with Red Robin “allows us to see how much pizza we can produce in a small footprint,” Krouse said. “If you just look at the amount of sales you can do per square foot per required, it doesn’t take a an economics award winner to figure out that opportunity.”